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News Release
RBC Bearings Incorporated Announces Fiscal 2018 Second Quarter Results

OXFORD, Conn.--(BUSINESS WIRE)--Nov. 3, 2017-- RBC Bearings Incorporated (Nasdaq: ROLL), a leading international manufacturer of highly-engineered precision bearings and components for the industrial, defense and aerospace industries, today reported results for the second quarter of fiscal year 2018.

Second Quarter Highlights

($ in millions)     Fiscal 2018     Fiscal 2017     Change
GAAP     Adjusted (1) GAAP     Adjusted (1) GAAP     Adjusted (1)
Net sales $164.3     $164.3 $153.9     $153.9 6.7%     6.7%
Gross margin $61.8 $61.8 $56.7 $56.7 9.0% 9.0%
Gross margin % 37.6% 37.6% 36.9% 36.9%
Operating income $25.3 $31.8 $29.6 $29.8 -14.5% 6.7%
Operating income % 15.4% 19.3% 19.2% 19.3%
Net income $14.8 $20.3 $18.2 $18.4 -18.7% 10.0%
Diluted EPS $0.61 $0.83 $0.77 $0.78 -20.8% 6.4%

(1) Results exclude items in reconciliation below.

 

Six Month Highlights

($ in millions)     Fiscal 2018     Fiscal 2017     Change
GAAP     Adjusted (1) GAAP     Adjusted (1) GAAP     Adjusted (1)
Net sales $328.2     $328.2 $308.5     $308.5 6.4%     6.4%
Gross margin $123.7 $123.7 $114.0 $114.4 8.5% 8.2%
Gross margin % 37.7% 37.7% 36.9% 37.1%
Operating income $57.1 $63.6 $58.8 $59.4 -2.9% 7.1%
Operating income % 17.4% 19.4% 19.1% 19.2%
Net income $36.6 $42.2 $36.3 $36.5 1.0% 15.7%
Diluted EPS $1.51 $1.74 $1.53 $1.54 -1.3% 13.0%

(1) Results exclude items in reconciliation below.

 

“Our solid second quarter operating performance was driven by strong industrial sales growth, combined with continued gross margin improvements across the organization,” said Dr. Michael J. Hartnett, Chairman and Chief Executive Officer. “We are able to maintain our improved margin profile as a result of our cost initiatives, manufacturing process improvements, and consolidation programs. Moving forward, our backlog remains strong and we are confident in our ability to maintain the strong momentum throughout the second half of the year.”

Second Quarter Results
Net sales for the second quarter of fiscal 2018 were $164.3 million, an increase of 6.7% from $153.9 million in the second quarter of fiscal 2017. Net sales for the aerospace markets decreased 1.2% and the industrial markets increased by 22.9%. Gross margin for the second quarter of fiscal 2018 was $61.8 million compared to $56.7 million for the same period last year. Gross margin as a percentage of net sales was 37.6% in the second quarter of fiscal 2018 compared to 36.9% for the same period last year.

SG&A for the second quarter of fiscal 2018 was $27.6 million, an increase of $2.4 million from $25.2 million for the same period last year. As a percentage of net sales, SG&A was 16.8% for the second quarter of fiscal 2018 compared to 16.4% for the same period last year.

Other operating expenses for the second quarter of fiscal 2018 totaled $8.9 million compared to $2.0 million for the same period last year. For the second quarter of fiscal 2018, other operating expenses were comprised mainly of $6.5 million related to restructuring of our Canadian operation and $2.4 million of amortization of intangible assets. Other operating expenses last year consisted primarily of $2.4 million in amortization of intangibles offset by $0.4 million of other income.

Operating income for the second quarter of fiscal 2018 was $25.3 million compared to operating income of $29.6 million for the same period last year. Excluding costs associated with restructuring of our Canadian operation, operating income would have been $31.8 million for the second quarter of fiscal 2018 compared to an adjusted $29.8 million for the same period last year. Excluding these adjustments, operating income as a percentage of net sales would have been 19.3% compared to 19.3% for the same period last year.

Interest expense, net was $1.9 million for the second quarter of fiscal 2018 compared to $2.3 million for the same period last year.

Income tax expense for the second quarter of fiscal 2018 was $8.5 million compared to $8.9 million for the same period last year. Our effective income tax rate for the second quarter of fiscal 2018 was 36.4% compared to 32.9% for the same period last year. The effective income tax rate was impacted by discrete tax benefit of $0.9 million associated with the restructuring of our Canadian operation and other state discrete tax benefits of $0.1 million.

Net income for the second quarter of fiscal 2018 was $14.8 million compared to $18.2 million for the same period last year. On an adjusted basis, net income would have been $20.3 million for the second quarter of fiscal 2018, compared to an adjusted net income of $18.4 million for the same period last year.

Diluted EPS for the second quarter of fiscal 2018 was 61 cents per share compared to 77 cents per share for the same period last year. On an adjusted basis, diluted EPS for the second quarter of fiscal 2018 would have been 83 cents per share compared to an adjusted diluted EPS of 78 cents per share for the same period last year, an increase of 6.4%.

Backlog, as of September 30, 2017, was $390.2 million compared to $341.8 million as of October 1, 2016.

Restructuring of Canadian Operation
In the second quarter of fiscal 2018, the Company reached a decision to restructure its manufacturing operation in Montreal, Canada. After completing its obligations, the Company expects to close its Montreal location and consolidate certain residual assets into other locations by the end of this fiscal year. As a result, the Company recorded an after-tax charge of $5.6 million associated with the restructuring in the second quarter of fiscal 2018 attributable to the Engineered Products segment. The $5.6 million charge includes $1.3 million impairment of fixed assets and $5.2 million impairment of intangible assets offset by $0.9 million tax benefit. The total expected impact of this restructuring will be between $7.0 million and $7.5 million in after-tax charges. The Company expects a positive cash flow result of approximately $4.4 million from this action.

Outlook for the Third Quarter Fiscal 2018
The Company expects net sales to be approximately $162.0 million to $163.0 million in the third quarter fiscal 2018. This would result in a growth rate of approximately 10.5% to 11.1% on a year over year basis.

Live Webcast
RBC Bearings Incorporated will host a webcast at 11:00 a.m. ET today to discuss the quarterly results. To access the webcast, go to the investor relations portion of the Company’s website, www.rbcbearings.com, and click on the webcast icon. If you do not have access to the Internet and wish to listen to the call, dial 844-419-1755 (international callers dial 216-562-0468) and provide conference ID # 9098489. An audio replay of the call will be available from 2:00 p.m. ET November 3rd, 2017 until 1:00 p.m. ET November 10th, 2017. The replay can be accessed by dialing 855-859-2056 (international callers dial 404-537-3406) and providing conference call ID # 9098489. Investors are advised to dial into the call at least ten minutes prior to the call to register.

Non-GAAP Financial Measures
In addition to disclosing results of operations that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release also discloses non-GAAP results of operations that exclude certain items. These non-GAAP measures adjust for items that Management believes are unusual. Management believes that the presentation of these non-GAAP measures provides useful information to investors regarding the Company’s results of operations, as these non-GAAP measures allow investors to better evaluate ongoing business performance. Investors should consider non-GAAP measures in addition to, not as a substitute for, financial measures prepared in accordance with U.S. GAAP. A reconciliation of the non-GAAP measures disclosed in the press release with the most comparable U.S. GAAP measures are included in the financial table attached to this press release.

About RBC Bearings
RBC Bearings Incorporated is an international manufacturer and marketer of highly engineered precision bearings and components. Founded in 1919, the Company is primarily focused on producing highly technical or regulated bearing products and components requiring sophisticated design, testing and manufacturing capabilities for the diversified industrial, aerospace and defense markets. The Company is headquartered in Oxford, Connecticut.

Safe Harbor for Forward Looking Statements
Certain statements in this press release contain “forward-looking statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including the section of this press release entitled “Outlook”; any projections of earnings, revenue or other financial items relating to the Company, any statement of the plans, strategies and objectives of management for future operations; any statements concerning proposed future growth rates in the markets we serve; any statements of belief; any characterization of and the Company’s ability to control contingent liabilities; anticipated trends in the Company’s businesses; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “estimate,” “intend,” “continue,” “believe,” “expect,” “anticipate,” and other similar words. Although the Company believes that the expectations reflected in any forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties beyond the control of the Company. These risks and uncertainties include, but are not limited to, risks and uncertainties relating to general economic conditions, geopolitical factors, future levels of general industrial manufacturing activity, future financial performance, market acceptance of new or enhanced versions of the Company’s products, the pricing of raw materials, changes in the competitive environments in which the Company’s businesses operate, the outcome of pending or future litigation and governmental proceedings and approvals, estimated legal costs, increases in interest rates, tax legislation and changes, the Company’s ability to meet its debt obligations, the Company’s ability to acquire and integrate complementary businesses, and risks and uncertainties listed or disclosed in the Company’s reports filed with the Securities and Exchange Commission, including, without limitation, the risks identified under the heading “Risk Factors” set forth in the Company’s most recent Annual Report filed on Form 10-K. The Company does not intend, and undertakes no obligation, to update or alter any forward-looking statements.

RBC Bearings Incorporated
Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
(Unaudited)
           
 
Three Months Ended Six Months Ended
September 30, October 1, September 30, October 1,
2017 2016 2017 2016
 
Net sales $ 164,317 $ 153,943 $ 328,214 $ 308,522
Cost of sales   102,506     97,212   204,494     194,540  
Gross margin 61,811 56,731 123,720 113,982
 
Operating expenses:
Selling, general and administrative 27,595 25,188 55,373 50,984
Other, net   8,938     1,989   11,269     4,223  
Total operating expenses 36,533 27,177 66,642 55,207
 
Operating income 25,278 29,554 57,078 58,775
 
Interest expense, net 1,914 2,255 3,943 4,548
Other non-operating (income) expense   64     149   436     267  
Income before income taxes 23,300 27,150 52,699 53,960
Provision for income taxes   8,477     8,922   16,067     17,692  
Net income $ 14,823   $ 18,228 $ 36,632   $ 36,268  
 
Net income per common share:
Basic $ 0.62 $ 0.78 $ 1.53 $ 1.55
Diluted $ 0.61 $ 0.77 $ 1.51 $ 1.53
 
Weighted average common shares:
Basic 23,946,360 23,470,650 23,875,749 23,395,614
Diluted 24,309,593 23,712,717 24,250,740 23,670,000
 
 
 
 
 
Three Months Ended Six Months Ended
Reconciliation of Reported Gross Margin to September 30, October 1, September 30, October 1,
Adjusted Gross Margin: 2017 2016 2017 2016
 
Reported gross margin $ 61,811 # $ 56,731 $ 123,720 # $ 113,982
Inventory purchase accounting adjustment   -     -   -     382  
Adjusted gross margin $ 61,811   $ 56,731 $ 123,720   $ 114,364  
 
 
 
 
 
Three Months Ended Six Months Ended
Reconciliation of Reported Operating Income to September 30, October 1, September 30, October 1,
Adjusted Operating Income: 2017 2016 2017 2016
 
Reported operating income $ 25,278 # $ 29,554 $ 57,078 # $ 58,775
Inventory purchase accounting adjustment - - - 382
Restructuring   6,494     222   6,494     222  
Adjusted operating income $ 31,772   $ 29,776 $ 63,572   $ 59,379  
 
 
 
 
 
Reconciliation of Reported Net Income and Net Income Three Months Ended Six Months Ended
Per Common Share to Adjusted Net Income and September 30, October 1, September 30, October 1,
Adjusted Net Income Per Common Share: 2017 2016 2017 2016
 
Reported net income $ 14,823 # $ 18,228 $ 36,632 # $ 36,268
Inventory purchase accounting adjustment (1) - - - 257
Restructuring (1) 5,577 149 5,577 149
Foreign exchange translation loss (gain) (1) (11 ) - 197 -
Discrete tax loss (benefit)   (134 )   33   (182 )   (182 )
Adjusted net income $ 20,255   $ 18,410 $ 42,224   $ 36,492  
(1) After tax impact.
 
Adjusted net income per common share:
Basic $ 0.85 $ 0.78 $ 1.77 $ 1.56
Diluted $ 0.83 $ 0.78 $ 1.74 $ 1.54
 
Weighted average common shares:
Basic 23,946,360 23,470,650 23,875,749 23,395,614
Diluted 24,309,593 23,712,717 24,250,740 23,670,000
 
 
 
 
 
Three Months Ended Six Months Ended
September 30, October 1, September 30, October 1,
Segment Data, Net External Sales: 2017 2016 2017 2016
 
Plain bearings segment $ 72,392 $ 68,835 $ 145,045 $ 139,285
Roller bearings segment 32,317 26,795 63,730 54,629
Ball bearings segment 16,480 14,569 32,260 28,279
Engineered products segment   43,128     43,744   87,179     86,329  
$ 164,317   $ 153,943 $ 328,214   $ 308,522  
 
 
 
 
Three Months Ended Six Months Ended
September 30, October 1, September 30, October 1,
Selected Financial Data: 2017 2016 2017 2016
 
Depreciation and amortization $ 7,140 $ 6,959 $ 14,238 $ 13,699
 
Incentive stock compensation expense $ 3,402 $ 3,178 $ 6,630 $ 5,952
 
Adjusted operating income plus depreciation/amortization        
plus incentive stock compensation expense $ 42,314 $ 39,913 $ 84,440 $ 79,030
 
 
Cash provided by operating activities $ 24,153 $ 19,301 $ 63,962 $ 38,513
 
Capital expenditures $ 7,008 $ 4,455 $ 12,667 $ 9,621
 
Total debt $ 220,228 $ 330,059
 
Cash and short-term investments $ 42,885 $ 37,462
 
Repurchase of common stock $ 3,356 $ 3,530
 
Backlog $ 390,185 $ 341,812

Source: RBC Bearings Incorporated

RBC Bearings
Daniel A. Bergeron, 203-267-5028
dbergeron@rbcbearings.com
or
Alpha IR Group
Michael Cummings, 617-461-1101
investors@rbcbearings.com